Bank failure

A bank failure is when a bank cannot meet its liabilities, such as payings its customers back. The closure of banks due to failure would inevitably lead to panic among its customers, who would swarm the bank in an attempt to withdraw as much of their money as they could before the bank closed and was unable to pay it back. Bank failure played a major role in the Great Depression of 1929-1941, as the closure of several banks due to their lack of business in addition to some of President Herbert Hoover's policies led to several bank scares and the emptying of money from the banks. Under the Emergency Banking Relief Act, President Franklin D. Roosevelt attempted to solve these problems in the United States by closing banks and reopening them with more funds from the Federal Reserve Banks, which gave people the opportunity to reopen their banks and pay back the creditors, ending the bank scares of the time.